Europe and U.S. Still Largest Private Label Markets, but Other Regions Seeing Huge Growth Fueled by Retailer Expansion, Says ACNielsen.

Business Editors

NEW YORK--(BUSINESS WIRE)--Sept. 16, 2003

Global Study Reveals Traditional Private Label Markets and

Categories Still Dominate, but New Ones Are Emerging

Retailers Now Marketing "Premium" Private Label Products

Sales of Private Label consumer packaged goods are a large and growing global phenomenon, according to a study released today by ACNielsen, the world's leading marketing information company. In the 36 countries and 80 categories studied, consumers spent 15% of total value sales on Private Label consumer packaged goods, but with widespread diversity across both markets and product types.

Private Label Continues to Hold High Share Positions in Europe

Europe remains the region with the largest Private Label share of total retail sales at 22%, with North America second at 16%. Even excluding Wal*Mart's Private Label sales, the United States remains the largest single market for Private Label sales in absolute dollars, while Switzerland has the highest Private Label share at 38%. More than 95% of Private Label sales identified by the study are found in Europe and North America.

In terms of the rate of growth for Private Label products, however, the study revealed a decidedly different picture. Latin America, Asia Pacific and the Emerging Markets all have very small Private Label markets in terms of overall retail sales, but are experiencing much more rapid sales growth. For example, the Emerging Markets of Czech Republic, Hungary, Poland and South Africa saw a collective growth rate of 48% compared to 2002, while Latin America and Asia Pacific saw year over year growth rates of 16% and 14% respectively. European growth was 6%, while North America, excluding Wal*Mart in the US, remained unchanged from 2002. Overall, growth rates for Private Label products outpaced those of manufacturers in nearly two-thirds of the countries studied (22 of 36).

"The high growth rates for Private Label in the developing markets are directly related to the expansion of global retailers beyond their traditional geographic borders. As they build infrastructure, they build their Private Label brands," noted Jane Perrin, ACNielsen Managing Director of Global Services and sponsor of the study, The Power of Private Label - A Review of Growth Trends Around the World.

The study's findings are based on ACNielsen sales data from 36 countries in North America, Western Europe, Emerging Markets, Asia-Pacific and Latin America, representing 65% of the world's Gross Domestic Product. A representative sample of 80 product categories was selected for review, chosen to provide a cross-section of Private Label activity across product types. Data was collected for the 12-month periods ending in April 2001, 2002 and 2003. For the purposes of this study, any Consumer Packaged Goods product that is sold exclusively by a specific retailer or chain is defined as Private Label.

Traditional Private Label Categories Remain On Top - But Some New Categories Growing Rapidly

As expected, some of the largest Private Label categories were within "traditional" strongholds that are often viewed as commodities, like the Paper Products, Plastic Bags and Wraps area. For instance, nearly half (46%) of Aluminum Foil sales were Private Label products, while Plastic Wrap/Rolls and Kitchen Paper/Towels attributed 33% and 32% respectively of their sales to Private Label. In the Food area, Complete Ready Meals (often offered in a special section of a store) had a 51% Private Label share, while Private Label Milk represented 44% of the total market and more than US$11 billion in actual value sales.

Looking beyond traditional categories, some distinct trends begin to emerge. In today's Private Label market, a different level of products has come to the fore - the premium "branded" Private Label product. These products offer consumers a quality Private Label choice as well as providing retailers an additional selling point for their stores. Some of these quality products may be branded with the retailer's name or even have a brand image all of their own (e.g. President's Choice).

Due to this "premium" phenomenon, some categories once deemed unreachable by Private Label are starting to see significant growth rates. Non-traditional categories such as Lip Stick/Gloss, Facial Cleansing, Eye Shadow, Baby Food, Drinking Yogurt and Sports Energy Drinks represent very small actual Private Label sales, but are all experiencing rapid growth rates versus comparable manufacturer brands (see chart 1 below).

"In areas like beauty products and baby food, trust is a vital element to success," noted Perrin. "Private Label's growth in these areas shows that retailers are marketing effectively to consumers beyond the simple 'low-cost, high-volume' approach of the past."

Chart 1 - Top Ten Fastest Growing Private Label Categories

                                PRIVATE    PRIVATE        MANUFACTURER
       CATEGORY                  LABEL       LABEL           GROWTH
                                 SHARE      GROWTH
----------------------------------------------------------------------
   1 Drinking Yogurt               8%        38%              17%
----------------------------------------------------------------------
   2 Sports Energy Drinks          6%        33%               9%
----------------------------------------------------------------------
   3 Lip Stick/Gloss               2%        26%               2%
----------------------------------------------------------------------
   4 Facial Cleansing              6%        21%               6%
----------------------------------------------------------------------
   5 Baby Food                     1%        20%               2%
----------------------------------------------------------------------
   6 Face Moisturizers             2%        20%              10%
----------------------------------------------------------------------
   7 Complete Ready Meals         51%        20%              13%
----------------------------------------------------------------------
   8 Eye Shadow                    3%        19%               2%
----------------------------------------------------------------------
   9 Cooking Oil                  21%        16%               7%
----------------------------------------------------------------------
  10 Flavored Milk Drinks         14%        13%               4%

Private Label Products Generally Found At Lower Prices

In its analysis, ACNielsen found that in the 36 countries and 80 categories studied, Private Label products were on average 31% cheaper than their manufacturer counterparts. This differential has remained fairly consistent since ACNielsen's previous global study in 1998. Within the countries and categories studied, however, important variances exist. For instance, in Poland the differential was 50%, where in Hong Kong it was only 10%. Europe, with its Private Label market share dominance, was home to seven of the top ten countries with the biggest differential between Private Label and manufacturer brands. The United States had the average differential of 31%.

At the category level, the product categories found in Personal Care and Health Care often had the largest price differential (greater than 40%). Private Label Pain Relief products, for example, were found to be 55% cheaper than manufacturer brands. At the other end of the spectrum, categories found within many food areas had the lowest differential, with a category like Frozen Fish (including Shellfish and Seafood) offered at less than a 10% difference.

Some Private Label Products Higher Priced Than Manufacturer Products

One interesting finding uncovered by ACNielsen is that in some categories Private Label prices were found, on average, equal to or even higher than manufacturer branded products.

One of the many drivers behind this trend is the previously mentioned retailer strategy of offering consumers premium "branded" Private Label products as a high-quality option and a unique selling point for the store. Other factors include the presence of Private Label products sourced from "imports" and thus more expensive than domestic manufacturer brands, differences in product package sizing, and manufacturer brands being more often found on promotion than Private Label, thus bringing their average price down.

Private Label Has Room to Grow

Commenting on the future prospects of Private Label worldwide, Perrin stated that, "Growth will continue as retailers become more and more sophisticated marketers and continue to expand to new markets. While the role of 'low price - high volume' for Private Label will always exist, retailers will also continue to build on the power of Private Label by offering even more premium priced, higher quality products. Manufacturers of branded products will see Private Label as a growing competitive threat in the global marketplace."

Countries Included

Western Europe                             Asia Pacific
--------------                             ------------
Austria                                    Australia
Belgium                                    Hong Kong, China
Denmark                                    Japan
Finland                                    Korea, Republic (South
France                                      Korea)
Germany                                    New Zealand
Great Britain                              Philippines
Greece                                     Singapore
Ireland                                    Thailand
Italy
Netherlands                                North America
Norway                                     -------------
Portugal                                   Canada
Spain                                      United States
Sweden
Switzerland                                Latin America
                                           -------------
Emerging Markets                           Argentina
----------------                           Brazil
Czech Republic                             Chile
Hungary                                    Colombia
Poland                                     Mexico
South Africa                               Puerto Rico

Tomorrow (September 17, 2003) ACNielsen U.S. will issue its annual detailed analysis of the Private Label business in the United States.

About ACNielsen

ACNielsen, a VNU business, is the world's leading marketing information company. Offering services in more than 100 countries, the company provides measurement and analysis of marketplace dynamics and consumer attitudes and behavior. Clients rely on ACNielsen's market research, proprietary products, analytical tools and professional service to understand competitive performance, to uncover new opportunities and to raise the profitability of their marketing and sales campaigns.

ACNielsen is part of the VNU Marketing Information Group. VNU is active in more than 100 countries, spread across all continents. VNU employs more than 38,000 people and has annual revenues of more than EUR 4.3 billion. For more, visit www.vnu.com.

Editor's Note: The complete text of The Power of Private Label - A Review of Growth Trends Around the World is available in both pdf and html format on ACNielsen's web site ACNielsen.com via the following links:

PDF:

http://acnielsen.com/download/pdf/reports/The_Power_of_Private_ Label.pdf (Due to the length of this URL, it may be necessary to copy and paste this hyperlink into your Internet browser's URL address field.)

HTML:

http://acnielsen.com/download/html/The_Power_of_Private_Label.htm